Interest on corporation tax might be payable in one of two circumstances.
First if the company is late in making payment for any tax due, interest will be charged from the date due up until the time that money is received by the authorities.
The current rate of interest charged on overdue corporation tax payments is 3.00% for late payments made after September 2009.
The second scenario is where there has been an overpayment or advanced payment of tax and Revenue and Customs repay that amount with interest to the company.
In situations where the total amount was paid instalments, the interest payments will be worked out on a last in first out basis.
This means that the latter amounts remitted by the company will be deemed to make up the bulk of the overpayments, whilst the earlier sums will absorb any remnants.
The corresponding rate of interest payable in such circumstances is 0.50% from September 2009 onwards.
Taxable and Deductable Interest
Interest received or paid in any of the above two scenarios will be subject to corporation tax.
In the case where it is received, it will form part of the company’s earnings in the period in which is was received and be added to any other profits in order to calculate the tax liability.
Where interest is paid as a result of a missed deadline, those amounts can form part of the company’s expenses in the period it is remitted and be a deduction from income in arriving to a profit figure.